Tribeca Company manufactures a variety of products. The following data pertain to the company's operations over the last two years:
Variable costing net operating income, last year $82,700
Variable costing net operating income, this year $87,800
Increase in ending inventory, last year 900
Decrease in ending inventory, this year 3,100
Fixed manufacturing overhead cost per unit $2
a. Determine the absorption costing net operating income for LAST year.
b. Determine the absorption costing net operating income for THIS year.
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The difference between variable and absorption costing relates to the fixed manufacturing overhead. In absorption costing the fixed manufacturing overhead is added to the inventory cost while in variable costing the fixed manufacturing overhead is expensed.
If there is beginning or ending ...
The solution explains how to determine the net income under absorption costing for two periods.